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UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 40425 / September 10, 1998
ADMINISTRATIVE PROCEEDING
File No. 3-9701
______________________________
:
In the Matter of :
:ORDER INSTITUTING PUBLIC
ANDREW PAUL TOMASKO, :PROCEEDING AND OPINION AND
:ORDER PURSUANT TO SECTIONS
Respondent. :15(b)(6) AND 21C OF THE SECURITIES
:EXCHANGE ACT OF 1934
______________________________:
I.
The Securities and Exchange Commission ("Commission") deems it
appropriate and in the public interest that a public
administrative proceeding be, and hereby is, instituted pursuant
to Sections 15(b)(6) and 21C of the Securities Exchange Act of
1934 ("Exchange Act") to determine whether Andrew Paul Tomasko
("Tomasko") caused and aided and abetted violations of Section
10(b) of the Exchange Act and Rule 10b-5 thereunder.
II.
In anticipation of the institution of this proceeding, Tomasko
has submitted an Offer of Settlement ("Offer"), which the
Commission has determined to accept. Solely for the purpose of
this proceeding and any other proceeding brought by or on behalf
of the Commission or to which the Commission is a party, and
without admitting or denying the Commission's findings contained
herein, except as to the Commission's finding of jurisdiction
over him and the subject matter of this proceeding, Tomasko
consents to the issuance of this Order Instituting Public
Proceeding and Opinion and Order Pursuant to Sections 15(b)(6)
and 21C of the Securities Exchange Act of 1934 ("Order") and to
the entry of the findings and the imposition of the relief set
forth below.
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III.
FACTS
Based on the foregoing, the Commission finds that:[1]
A.Summary
On July 27, 1993, First Eastern Corporation ("First Eastern")
announced that it would be purchased by PNC Bank, causing First
Eastern's stock to rise substantially. Prior to the public
announcement of the merger, Paul Tomasko, a broker in Clarks
Summit, Pennsylvania, executed a purchase of 1000 shares of First
Eastern stock for a client that he knew was in possession of
material nonpublic information obtained from a director of First
Eastern.
B.Respondent
Tomasko is 65 years old and resides in Clarks Summit,
Pennsylvania. From March 1993 through the present, Tomasko has
been employed as a registered representative in the Clarks
Summit, Pennsylvania office of Rutherford, Brown & Catherwood
("Rutherford"), a broker-dealer registered with the Commission
pursuant to Section 15(b) of the Exchange Act.
C.Other Relevant Persons and Entities
First Eastern Corporation was a bank with its headquarters in
Wilkes-Barre, Pennsylvania. First Eastern's common stock traded
on NASDAQ until August 1994, when it was acquired by PNC Bank
("PNC") of Pittsburgh, Pennsylvania. The purchase of First
Eastern by PNC was first publicly disclosed on July 27, 1993.
John G. Martines ("Martines"), during the relevant period, was
the chairman and CEO of Lake Ariel Bancorp, a public company.
Tomasko served as Martines' stockbroker at Rutherford. Martines
and Tomasko were also friends, often socializing together at the
Scranton Country Club, of which they were both members.
Harry C. Morgan ("Morgan"), a Scranton, Pennsylvania businessman,
was a director of First Eastern during the relevant period.
Morgan was a member of the Scranton Country Club, and had a
personal and business relationship with Martines.
**FOOTNOTES**
[1]:The findings herein are made pursuant to the Offer of
Settlement made by Andrew PaulTomasko and are not bindingon any
other person or entity in this or any otherproceeding.
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D.Background
On Wednesday, July 21, 1993, a special mergers and acquisitions
committee of the board of directors of First Eastern disclosed to
the full board at its regular board meeting, attended by Morgan,
that it was negotiating for the sale of First Eastern to PNC.
The committee sought board authorization to allow PNC to complete
due diligence over the following weekend. The board authorized
the due diligence, hoping to finalize the transaction over the
weekend. Morgan was told at the board meeting that all
information regarding the negotiations with PNC was confidential
and that he was under a duty to maintain the confidentiality of
this material, nonpublic information.
In breach of his duty of confidentiality to First Eastern, Morgan
disclosed to Martines that First Eastern would be acquired by
PNC at a dinner at the Scranton Country Club held on Friday, July
23, 1993.[2]
E.Tomasko's Assistance to Martines' Trading
After learning from Morgan that PNC would purchase First Eastern,
Martines discussed the information he heard from Morgan with
Tomasko. Tomasko knew that Morgan was a director of First
Eastern, and knew that Morgan had confirmed to Martines that
First Eastern would be acquired. Tomasko also knew, or was
reckless in not knowing, that Morgan's statement to Martines
violated Morgan's duty of trust and confidence to First Eastern.
After disclosing his conversation with Morgan, Martines requested
that Tomasko execute a purchase of 1000 shares of First Eastern
stock for his account on Monday, July 26, 1993, the next trading
day. Martines telephoned Tomasko in the morning on July 26, 1993
and again asked him to execute the purchase. At 10:08 a.m. EDT
on July 26, 1993, Tomasko executed a purchase of 1000 shares for
his client Martines at $17.75 per share, for a total purchase
price of $17,750.
On July 27, 1993, after the announcement of the merger between
First Eastern and PNC, First Eastern's stock price rose to
approximately $25 per share. That same day, Tomasko executed a
sale of 1000 shares of First Eastern stock for Martines, for a
sale price of $25.125 per share, resulting in an overnight profit
of $7,375 for Martines.
**FOOTNOTES**
[2]:On January 2, 1997, Morgan and Martines each consented, without
admitting or denying the allegations in the Commission's complaint, to the
entry of orders permanently enjoining them from future violations of
Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, ordering
disgorgement plus prejudgment interest, and ordering the payment of civil
penalties pursuant to Section 21A of the Exchange Act. SEC v. Morgan, 97-
CV-0001 (M.D. Pa.), LR-15203 (January 2, 1997).
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IV.
Registered representatives are the gatekeepers of the retail
securities market, and as such have a responsibility to safeguard
the market's integrity in all of their professional dealings.
They are clearly duty-bound not to engage in conduct that would
assist their customers in violating the securities laws. By
executing a trade for his customer Martines knowing that Martines
was in possession of material nonpublic information obtained in
breach of duties Morgan owed to First Eastern, Tomasko caused
violations and willfully aided and abetted violations of Section
10(b) and Rule 10b-5 thereunder.
V.
Accordingly, IT IS HEREBY ORDERED, pursuant to Sections 15(b)(6)
and 21C of the Exchange Act, that:
A.Tomasko cease and desist from causing or aiding and abetting any
violation, and causing or aiding and abetting any future violation, of
Section 10(b) of the Exchange Act and Rule 10b-5 thereunder;
B.Tomasko be suspended from association with any broker or dealer for a
period of forty-five (45) days, commencing within ten days of the entry of
the Order; and
C.Tomasko pay a civil penalty of $10,000. Payment of $10,000 shall be made
within thirty (30) days of the entry of the Order. Payment shall be made
by U.S. postal money order, certified check, bank cashier's check, or bank
money order, made payable to the "Securities and Exchange Commission" and
bearing on its face the caption "In the Matter of Andrew Paul Tomasko"; and
shall be transmitted by certified mail (return receipt requested) to the
Comptroller, U.S. Securities and Exchange Commission, Mail Stop 0-3, 450
Fifth Street, N.W., Washington, D.C. 20549, under cover of a letter that
identifies the respondent, the name of the matter and the Administrative
Proceeding file number, and the Commission's case number (HO-2861). A copy
of the cover letter and the check or money order shall be transmitted
simultaneously to Gregory S. Bruch, Esq., at the U.S. Securities and
Exchange Commission, Mail Stop 7-3, 450 Fifth Street, N.W., Washington,
D.C. 20549.
By the Commission.
Jonathan G. Katz
Secretary